real estate taxes

Miami Property Taxes

The down Miami real estate market has caused market prices to fluctuate. Lately, we are getting a lot of tax assessment questions and we thought it would help our readers to at least clear some misconceptions.

First, I’d like to share a couple of tools with you that I know you will find helpful:

  • Miami Dade.gov offers property information by providing an address, folio number or an owner name – MiamiDade.gov property search
  • The Miami-Dade.gov website also offers a tax estimator which is a great tool when you are trying to figure out what your real estate taxes will be when purchasing real estate in Miami. – Tax Estimator (make sure you read the “tax estimator disclosures”)

There has always been issues with Miami Real Estate Buyers not getting the correct information about property taxes. We have heard nightmares about buyers being mislead about their taxes and in many cases not being able to afford the property after re-assessments.

Our purpose here is to provide information – to educate our readers and provide facts that you will find helpful when buying real estate in Miami. Some of this information may be very basic, but it’s better to start from the beginning to make sure we don’t miss anything.

Definition

Real Estate taxes, also called property taxes are based on the value of real property. State law requires that the county property appraiser assess real property for all levels of government, thus avoiding duplication and possible controversy. All real property assessments must be updated annually.

Property taxes in Florida are paid at the end of the tax year for the period January 1 through December 31 each year. Taxes are payable to the county tax collector on or after November 1 each year – these may be paid in 4 installments or in a single payment. (there is a discount system if taxes are paid promptly).

What is “just value”

Property taxes are levied against land and all improvements to the land (the actual building) – the assessed values to the land and improvements are arrived at separately and then combined to reflect a property’s single assessed value.

Here’s the kicker – The state supreme court has interpreted Florida statutes as requiring that all real property be assessed at JUST VALUE – “the fair and reasonable value based on objective valuation methods”.

To arrive at “just value” the county property appraisers take into consideration property characteristics (location, size, and condition), the highest and best use of the property and, if income producing, the income generated from the property. A representative from the property appraiser’s office typically goes into the community to asses property by collecting data using specific forms and recording procedures and using appropriate “secret” valuation formulas to come up with an objective estimate of assessed value.

“Just value may not conform to market value but it is calculated in relation to a market value base”

And to make things a bit more confusing, but should be very clear if you are buying real estate in Miami, is that the sale price of a property does not become the controlling factor in determining the assessed value, although it is taken into consideration.

Dispute

Property owners are entitled to protest property assessments, but not all disputes will be successful. There are companies that specialize in property tax assessment disputes, and most of them charge a percentage of the discount and sometimes application fees.

We have clients that are commercial property owners that dispute their taxes every year and the discount varies from nothing to a few thousand dollars which ultimately is worth the dispute for them.

Common questions

Some of the problems with tax assessment interpretations we are seeing in today’s market are the following:

  • You are buying a distressed property that is priced under market value (whether a short sale, foreclosure or fire-sale) – please take into consideration that the assessed value will most likely be higher than the purchase price. Keep in mind that you are getting a great deal and the tax assessment will be based on market value, not purchase price (see above)
  • Property values have decreased and you are buying a property that is assessed above market price and does not reflect current real estate market. You will be able to dispute the assessment, but be realistic about your expectations and always keep a worst case scenario in mind.
  • You are buying a property that has been homesteaded for many years and reflects very low taxes – The property will be reassessed! Don’t look at what the current owner pays but calculate what you will be paying once the property is reassessed.
  • You are buying a property that is in very bad condition and needs to be rehabed. The property assessment may reflect a property in perfect condition – Although you can try to dispute the taxes, you should always keep in mind what the value of that property will be after being rehabbed.

In my opinion, real estate taxes are very misunderstood because people try to go around reality to come up with figures that will benefit them but may not necessarily be objective when calculating those numbers.

Our advice to you is to be realistic, talk to your Realtor and make sure you are studying the right figures. Always consider worst case scenarios and if at anytime you think you will not be able to afford real estate taxes on a particular property, it’s better to re-examine your purchase strategy.

Statutes (provided by a reader)

A reader and attorney by the name of Brett Steinberg was nice enough to contact me and give me the article numbers and case name from the Florida Supreme Case Decision of 2005. (The Supreme Court Decision of The Florida Department of Revenue vs. Howard – 2005: 9-167 second 640

For anyone interested in taking a look – the issue of “just value” can be found in Article 7, Section 4 of the Florida Constitution.  There are 8 factors that have to be used to determine “just value” and can be found in section 193.011

Thanks again Brett!

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